September 30, 2014
The Board is currently managing two major capital improvement projects that are included as key themes in the Board's Strategic Framework 2012-15: the Martin Building renovation and construction and the relocation of the Board's data center. Both are multiyear projects that involve significant resources and pose challenges due to their size, complexity, and effect on the Board's staff members and mission. In addition, managing large-scale construction projects is not a core function of the Board.
The Martin Building facility has not been significantly renovated since its construction in 1974. In addition to ensuring a safe and adequate environment in which individuals and groups can work and meet, efforts associated with the renovation will focus on security, energy efficiency, meeting and conference space, and physical plant capacity. Relocating the data center is critical because the Board needs increased storage capacity for the data essential to its mission. As currently planned, the relocation of the Board's data center will overlap with the Martin Building project, creating an additional challenge as the Board attempts to oversee and manage both projects. In addition to managing these projects, the Board will have to adapt its space-planning and leasing activities due to the Martin Building project. The Board will need to manage the swing space acquired to accommodate its significant workforce growth as well as staff members displaced from the Martin Building during the construction period.
The Martin Building renovation and construction project is one of the Board's largest contracting efforts, and it will require an estimated $280 million expenditure. The concept for the project began shortly after the events of September 11, 2001. Since the original concept was developed, the Martin Building project has gone through a lengthy design phase, primarily due to significant scope changes. In addition, project management has been complicated by changes in the Board's organizational structure and leadership.
The Martin Building renovation and construction project is a complex undertaking with significant implementation risks and challenges that the Board must manage. These risks include scope changes, cost management, and disruption to staff members during the renovation. Delays during construction could lead to contractor claims and increased costs for the Board due to the size of the construction contract and the nature of construction work. Many parties are involved in the construction life cycle process, and interdependencies exist. As a result, delays could cascade and affect the timing and sequencing of others' work.
In September 2012, the Martin Building project team presented an overall conceptual construction cost estimate of $179.9 million to the Committee on Board Affairs. The project was approved as a strategic plan project, and the capital portions of the project are currently included as a multiyear capital project in the Board's 2013 Budget as Approved by the Board of Governors. Our audit of this conceptual construction cost estimate identified opportunities for the Board to improve its recordkeeping, cost estimation, and cost management processes for the Martin Building project.
Since 2011, the Board has hired personnel with construction experience. In addition to the project team, an executive team and the Executive Oversight Group were established to be strategic advisors to the Martin Building renovation and construction project. The project team purchased software that provides collaboration, project management, and information management applications specifically for the architectural, engineering, design, and construction business sector. In addition, the project team is currently maintaining files initiated by the former project manager to fulfill contracting officer technical representative and project record keeping responsibilities. After receiving independent cost reviews, a stated cost limitation was established with the architectural and engineering firm, and the firm submitted cost-saving items to aid in cost management.
A key consideration of the Martin Building renovation and construction project is the future of the data center. The Board has undertaken a multiyear project to move its data center from the Martin Building to the Baltimore Branch of the Federal Reserve Bank of Richmond. The Board is relocating the data center because the growing number of file servers, network racks, and network switches has dramatically increased the footprint of data center operations. Critical subsystems for cooling and power have exceeded their capacity. The data center relocation is a major element of the third theme in the Board's Strategic Framework 2012–15, and the multiyear data center project is composed of four overlapping phases, with completion scheduled for December 2015.
Relocating the Board's data center within the approved budget and schedule will pose challenges to the Board. The start of the Martin Building renovation and construction project is contingent on completion of the data center relocation. The construction phase of the data center relocation project has an aggressive schedule with several identified risk areas. The initial planning schedules for the Martin Building project and the completion of the data center project have a six-month overlap; therefore, delays in the data center schedule could affect the Martin Building project. The Board's data center operates 24 hours a day, 365 days a year, to monitor the operation of the Board's mainframe and the status of the file servers and other critical components of the Board's distributed network. The data center provides the infrastructure that makes data and IT available to the Board and to the Federal Reserve System for monetary policy, financial supervision, consumer protection, and economic research purposes.
The Board has approved $201.5 million as the overall budget for the project. The budget was based on a 10-year total cost of ownership estimate based on a rough order of magnitude. As the actual build-out work begins, additional changes and cost increases are possible, which could potentially affect the budget.
The Federal Reserve Bank of Richmond is responsible for the build-out of the data center, and it designated a project manager to oversee the project. The Board designated a program manager and a project manager, both within the Division of IT, to oversee the project in coordination with a team composed of members with experience in IT, procurement, and financial management, among other areas. There is also an Executive Oversight Group that oversees and provides guidance on the project and ensures that the Board's strategic objectives are being met.
The Board currently occupies space in several buildings in Washington, DC. The Board's overall staffing level has grown significantly over the last several years, and continued growth is expected in some of its divisions. The Board is challenged with accommodating both the expected growth of its workforce and the placement of staff members in swing space due to the Martin Building renovation and construction project, while also effectively managing its existing real property assets.
The Board acknowledges the need to focus on its long-term space requirements while also considering, in the context of its strategic framework, factors such as the current space environment, building location limitations, the projected growth of the organization, technological requirements, the implications of telework, and the operational effects and life cycle costs of all options. Considering these factors will help the Board to develop a meaningful approach for the most efficient and effective use of space.
The Board signed a 10-year lease for swing space to relocate staff members displaced by the Martin Building renovation. To accommodate anticipated growth in some divisions, the Board plans to retain that space after the renovation is complete. Recognizing that it needs to take a more consistent approach to space planning, the Board is developing a standard process for allocating and managing its space. The Board is also developing a strategic master plan for space planning, and it contracted for real estate advisory services to assist with this effort. This plan is intended to inform the decisions of the Board's senior leadership regarding the Board's space needs.
